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Foreign Aid in Africa: Implications for Democratic Transitions and Consolidation

Danielle Resnick / Oct 2011

In just a little over a month, policy makers will converge in Busan, South Korea for the fourth High Level Forum on Aid Effectiveness. Among other issues, policy makers will consider financial pressures in donor countries and the rise of new actors in development, including private corporations, non-governmental organizations (NGOs), and countries such as China, India, and Brazil. An issue that does not feature prominently on the agenda, however, is how effective aid has been for promoting democracy in some of the world's most aid-dependent countries, especially in sub-Saharan Africa. Given the outbreak over the past year of electoral violence in Côte d'Ivoire, Nigeria, and Uganda, and citizen protests over democratic infringements in Burkina Faso, Malawi, and Senegal, a greater understanding of the role of aid in the democratization process remains critically important.

Existing research on aid and democracy traditionally falls within at least three different categories. First, there is a broad range of cross-country econometric analyses examining the impact of aid on democracy. Aside from a few notable exceptions, much of this literature fails to disaggregate different types of aid or to consider that aid will exhibit disparate impacts depending on a country's democracy trajectory. The findings from this research often have been contradictory, inhibiting the generation of cumulative knowledge. A second literature focuses on isolated case studies of African countries without providing a comparative context while a third strand concentrates on allocations and decision-making processes within major donor countries.

UNU-WIDER project: Foreign Aid and Democracy in Africa

UNU-WIDER aims to push the boundaries on existing research through its current project on Foreign Aid and Democracy in Africa. The project uncovers the channels through which development and democracy aid have influenced democratic transitions and consolidation in Africa and elaborates on domestic factors that facilitate or undermine aid's impact.Development aid refers to resources distributed for the goal of furthering social welfare. This aid can be further disaggregated into different modalities, such as project-based lending, sector-wide approaches (SWAps), and general budget support. Democracy aid is specifically designed to promote greater political liberalization. While development aid encourages democracy through social and economic transformation, democracy aid focuses more on domestic agents to foster change. More importantly, democracy aid offers few 'carrots' or 'sticks' compared with development aid.

The project relies on a mixed-methods approach conducted by foreign aid and country experts. A quantitative analysis examines whether development and democracy aid demonstrated a differential impact on transitions to multiparty regimes in Africa during the 1990s as well as their influence on various measures of consolidation in more recent years. This is complemented by in-depth case studies based on recent fieldwork in seven countries: Benin, Ghana, Malawi, Mali, Mozambique, Tanzania, and Zambia. These countries are recipients of large shares of aid from a broad range of donors, possess different levels of access to alternative financing, and collectively represent dominant, two-party, and fragmented party regimes.

Preliminary findings

A number of findings are beginning to emerge from the project. First, development aid, much more than democracy aid, was effective at promoting democratic transitions during the 1990s in a range of African countries. The most direct impact was through the exercise of leverage by donors who increasingly began attaching political conditionalities to development aid during this period. Factors that augmented the effectiveness of leverage were a country's degree of aid dependence, the level of donor co-ordination, and the concurrent existence of domestic discontent. Aid often played a facilitating role as well by ensuring that countries' first multi-party elections were well-financed and monitored.

Development and democracy aid also demonstrate disparate effects on key elements of consolidation, including the avoidance of democratic erosion, the enhancement of accountability, and the promotion of competitive party systems. With respect to democratic erosion, donors have threatened to reduce or rescind aid in a number of instances where incumbents attempted to abrogate presidential term limits in their constitutions or where media freedoms have been suppressed. Yet, donors are inconsistent in the scale and timing of their interventions, pointing to the need for greater understanding about why they choose to exercise leverage over some issues, and in some countries, but not others.

As the red-dashed line indicates in the Figure, democracy aid remains extremely small in comparison with total overseas development assistance to Africa. However, it plays a much more direct role with respect to vertical and horizontal accountability. By supporting independent media outlets, augmenting the capacities of civil society, reinforcing electoral commissions, and strengthening legislatures and judiciaries, democracy aid aims to reinforce relationships of responsibility between citizens and their governments as well as between different government institutions. Without this aid, many of the key institutions and actors important for consolidation would be much weaker. By contrast, development aid has long been speculated to operate as a 'strategic rent' that undermines government accountability to citizens. Our project's preliminary findings also uncover how the modality of budget support contradicts many democracy aid efforts by promoting the influence of finance ministries and executives while further sidelining already weak legislatures.

With respect to competitive party systems, democracy aid again exhibits a more direct influence, particularly through party assistance provided through either bilateral donors, inter-governmental agencies, such as the United Nations Development Program (UNDP), or NGOs, such as the National Endowment for Democracy (NED) and the German party foundations. Yet, while competitive political parties are the sine qua non of democracies, party aid remains relatively small, concentrated around elections, and highly contentious, especially in dominant-party regimes such as those in Mozambique and Tanzania.

Development assistance can have some unintentional and indirect influences on party systems, mainly by augmenting existing advantages for the incumbent. For example, incumbents can take credit for donor projects around elections through ribbon-cutting ceremonies and other media stunts. Moreover, aid delivered as general budget support can reinforce the political business cycle by allowing governments to increase expenditures right before elections. In such cases, aid can be used to augment expenditures for developmental needs but ones that offer private pay-offs, such as fertilizer input subsidies, rather than broader public goods. If general budget support is fungible,then incumbents can also use the resources to fund the purchase of vehicles, advertisements, and handouts that give them a campaign advantage around elections.

Unresolved tensions

An unresolved issue uncovered by the project is the lingering tension between the goals of development and democracy aid. Outcomes from previous high-level meetings on aid effectiveness, including the Paris Declaration and the Accra Agenda for Action, aimed to harmonize development assistance, especially through budget support, and to view developing country governments as partners with 'ownership' rather than just recipients. The resultant emphasis has been more on economic governance, including enhancing public sector management by working closely with national finance ministries and other key public institutions. In the realm of democracy aid, however, the aim is to engage a much broader range of stakeholders and promote more responsive, responsible, and representative political governance.

Under normal circumstances, such dual objectives are rarely problematic, other than by spreading scarce donor resources in a wide array of directions. Yet, when governments with good macroeconomic performance and well-managed public financial institutions begin censoring the media, harassing opposition leaders, or persecuting minorities, the trade-offs between promoting economic and political governance become much more apparent. The unfortunate example of Malawi, where many budget support donors were loath to criticize an increasingly autocratic government until the country ultimately descended into a foreign exchange crisis, is illustrative in this regard. Thus, a critical gap on the aid effectiveness policy agenda is how to align, both across and within donor agencies, the aid approach that is best for development with the approach that is best for supporting young democracies.